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Responsible Diversification: Knowing Enough About Diversification To Do It Responsibly: Motives, Measures And Consequences

Author

Listed:
  • Ma. Belén Lozano García

    (Universidad de Salamanca Salamanca Spain)

  • Alberto de Miguel Hidalgo

    (Universidad de Salamanca Salamanca Spain)

  • Diana Monserrat Ríos Rodríguez

    (Universidad Autónoma de Tamaulipas Victoria Spain)

Abstract

Diversifying in a responsible way is a challenge that many firms face today. In thissurvey we posit whether firms should diversify and whether it is a way to create value, since themotives leading to diversification are not always addressed to satisfying all stakeholders, and as aconsequence the outcome may be different from the one expected. Our aim is to smooth the way formanagers, shareholders, professionals and decision-makers in general by offering an exhaustiveand rigorous description of the lessons provided by the literature, analyzing the reasons fordiversifying or not, describing the costs and benefits of the process and analyzing the discount onfirm value.

Suggested Citation

  • Ma. Belén Lozano García & Alberto de Miguel Hidalgo & Diana Monserrat Ríos Rodríguez, 2013. "Responsible Diversification: Knowing Enough About Diversification To Do It Responsibly: Motives, Measures And Consequences," Annales Universitatis Apulensis Series Oeconomica, Faculty of Sciences, "1 Decembrie 1918" University, Alba Iulia, vol. 1(15), pages 1-19.
  • Handle: RePEc:alu:journl:v:1:y:2013:i:15:p:19
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    References listed on IDEAS

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    1. Morck, Randall & Shleifer, Andrei & Vishny, Robert W, 1990. " Do Managerial Objectives Drive Bad Acquisitions?," Journal of Finance, American Finance Association, vol. 45(1), pages 31-48, March.
    2. Juan Santalo & Manuel Becerra, 2008. "Competition from Specialized Firms and the Diversification-Performance Linkage," Journal of Finance, American Finance Association, vol. 63(2), pages 851-883, April.
    3. Servaes, Henri, 1996. " The Value of Diversification during the Conglomerate Merger Wave," Journal of Finance, American Finance Association, vol. 51(4), pages 1201-1225, September.
    4. Raghuram Rajan & Henri Servaes & Luigi Zingales, 2000. "The Cost of Diversity: The Diversification Discount and Inefficient Investment," Journal of Finance, American Finance Association, vol. 55(1), pages 35-80, February.
    5. Belén Villalonga, 2004. "Diversification Discount or Premium? New Evidence from the Business Information Tracking Series," Journal of Finance, American Finance Association, vol. 59(2), pages 479-506, April.
    6. John R. Graham & Michael L. Lemmon & Jack G. Wolf, 2002. "Does Corporate Diversification Destroy Value?," Journal of Finance, American Finance Association, vol. 57(2), pages 695-720, April.
    7. Karl Lins & Henri Servaes, 1999. "International Evidence on the Value of Corporate Diversification," Journal of Finance, American Finance Association, vol. 54(6), pages 2215-2239, December.
    8. Barnea, Amir & Logue, Dennis E, 1973. "Stock-Market Based Measures of Corporate Diversification," Journal of Industrial Economics, Wiley Blackwell, vol. 22(1), pages 51-60, September.
    9. Comment, Robert & Jarrell, Gregg A., 1995. "Corporate focus and stock returns," Journal of Financial Economics, Elsevier, vol. 37(1), pages 67-87, January.
    10. Andreas Bausch & Frithjof Pils, 2009. "Product diversification strategy and financial performance: meta-analytic evidence on causality and construct multidimensionality," Review of Managerial Science, Springer, vol. 3(3), pages 157-190, November.
    11. Santalo, Juan & Becerra, Manuel, 2006. "The dominance of diversified versus specialized firms across industries," Journal of Business Research, Elsevier, vol. 59(3), pages 335-340, March.
    12. Shleifer, Andrei & Vishny, Robert W., 1989. "Management entrenchment : The case of manager-specific investments," Journal of Financial Economics, Elsevier, vol. 25(1), pages 123-139, November.
    13. Sattar A. Mansi & David M. Reeb, 2002. "Corporate Diversification: What Gets Discounted?," Journal of Finance, American Finance Association, vol. 57(5), pages 2167-2183, October.
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    More about this item

    Keywords

    value creation; diversification; discount; responsible strategic decision-making;

    JEL classification:

    • G0 - Financial Economics - - General
    • M2 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics

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